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Politics : Ask Michael Burke
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To: Knighty Tin who wrote (45811)2/6/1999 2:49:00 PM
From: Mark Adams  Read Replies (1) of 132070
 
Mike, I've heard that the increased money supply is partially offset by a decreased velocity. Do you put any weight on this?

If there truly is a lower multiplier effect due to foreign holdings of dollars, under the mattress, then a weaker dollar due to monetary expansion may not take place until these dollars actually circulate. The key to look for would be an increase in velocity.

Now I do believe the dollar will lose value, for reasons other than expansion of the money supply. We've recently seen the AUS dollar rebound from .55 to .63, but not so long ago .87 was the exchange rate so more may be to come.

I have to wonder about these exchange rate moves, if they are just 'at the margin' much as stock prices influence market caps. It would seem that the move from .63 to .55 represented unimaginable amounts of capital/wealth.
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